Category Archives: Macroeconomic policy

Ignacio Portes: How the Left Underestimates Chile’s Right-Wing Keynesians

Yves here. Please welcome Igancio Portes to NC. He’s a sophisticated young writer who has a sharp eye for power dynamics and is keenly interested in why the left (the genuine left as opposed to the fake version we have in the US) so often fails to achieve its intended results when it gets control of a government. He’ll be providing posts from time to time on Latin America, which is too often covered in a cursory and propagandized manner in the mainstream English language press.

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Ann Pettifor on Combatting the Despotic Power of Finance

Economist Ann Pettifor discusses how economies around the world moved from using borrowing to support productive investments to fueling speculation and consumption, and how that led to the financial crisis. She also describes how the post-crisis response to the debt overhang isn’t merely ineffective but in fact counterproductive.

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Yanis Varoufakis: Greek Finance Minister Reveals Advanced Case of Stockholm Syndrome

This is a stupendous story. Possibly for the first time in its tainted history, the International Monetary Fund had a major change of heart and tried to do the right thing by a ‘program’ country, only to be turned down by that very same country’s finance minister!

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Chris Mayer: How Fiat Money Works

Warren Mosler tells a good story that shows how our economy works at its most basic level.

Imagine parents create coupons they use to pay their kids for doing chores around the house. They “tax” the kids 10 coupons per week. If the kids don’t have 10 coupons, the parents punish them. “This closely replicates taxation in the real economy, where we have to pay our taxes or face penalties,” Mosler writes.

So now our household has its own currency. This is much like the U.S. government, which issues dollars, a fiat currency. (Meaning Uncle Sam doesn’t have to give you something else for it. Say, like a certain weight in gold.) If you think through this simple analogy, all kinds of interesting insights emerge.

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Diagrams and Dollars: Modern Money Illustrated (Part 1)

Yves here. I continue to get requests to explain Modern Monetary Theory. It isn’t easily done in a few words, but fortunately, the academics and writers associated with the New Economics Perspectives blog keep publishing primers of various sorts. This one takes a different approach in using visuals to help illustrate the difference between how most people believe the money system operates versus how it really works.

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Yanis Varoufakis: Why Reinhart and Rogoff are Wrong About the Eurozone’s Debt Structure and the Costs of Debt Mutualisation

Yves here. I don’t know whether to be relieved or annoyed to see Carmen Reinhart and Ken Rogoff retreat from their pro-austerity stance and endorse debt restructuring, since their prior view (that budget-cutting was necessary and productive) served to justify considerable and unnecessary pain being inflicted on periphery Eurozone countries to preserve the illusion of health of French and German banks.

But as Yanis Varoufakis points out, although Reinhart and Rogoff are retreating from much of their erroneous thinking, they haven’t renounced all of it.

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The Fed’s Taper and Market Fealty

The Fed’s announcing the taper was supposed to be an earth-shaking event. But that actually sorta happened last summer when Bernanke first used the “t” word and interest and mortgage rates made an impressive upward march in a short period of time.

From my considerable remove, what was noteworthy about the Fed’s announcement yesterday is how terrified it seems to be of creating an upset.

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The Eurozone: If Only It Were the 1930s

Yves here. This post looks at the strictures of the Eurozone (debt to GDP and deficit limits) and not surprisingly concludes that the supposedly independent ECB is making matters worse that a more “political,” as in growth oriented one, would. But depicting central bank independence as detrimental is a novel and important argument.

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Yanis Varoufakis: Confessions of an Erratic Marxist in the Midst of a Repugnant Eurozone Crisis

Yves here. Even though Yanis Varoufakis has savaged the Trokia’s austerity policies that are driving Greece and other periphery countries into economic and social distress as well as fueling the rise of extreme right wing parties, some readers of this blog have criticized him for advocating reforms to pull the Eurozone out of its nosedive […]

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